Franchising - Great Expectations

Written on the 2 June 2010 by Philip Ciniglio

It is vitally important to seek advice when purchasing a franchised business. Do not try and go it alone. The cost associated with seeking advice will potentially save you money in the long term. Seek advice from experienced franchise advisers. Do not be nervous to ask about their experience in franchising.

To make sure you make an informed decision about purchasing a franchise, you should seek advice from a:

• A franchise lawyer
• A franchise accountant
• A franchise business consultant

Benefits for Franchisees

There are a number of benefits to owning a business franchise rather than being independent. These benefits create a safety net and lower risk of failure.  Some of these benefits would include:

• The brand name and its reputation
• Established business methods
• A proven product or service
• Site selection and location
• Startup and on-going training
• Opening and launch assistance
• Group purchasing benefits
• Reduced cost of national and regional advertising
• Ongoing product research and development

Restrictions on Franchisees

On the flipside of the coin, if you choose to buy a franchise business then you would be expected to adhere to some of the following rules:

• The franchisor has ultimate control
• You must comply with the franchise agreement and operations manual
• You need to be a team player in a network
• You can only on-sell your franchise business to a franchisor approved buyer
• A commitment to pay ongoing royalties (if they have them)
• Maintain relationships with the franchisor and their staff

What not to expect:

Do not expect the franchisor to:

• Run your business for you
• Do your planning for you
• Provide staff if you are short
• Give you your money back if you are not happy
• Implement all of your good ideas
• Supplement your local marketing
• Excuse you from meetings and conferences
• Assure you of your financial success

Yes, you should receive an appropriate amount of support but it is still your responsibility to make the franchise successful.

Franchising represents a significant percentage of businesses in Australia - 960 unique systems, 62,000 businesses, 40,000 jobs, turnover of more than$200 billion and 14% of the national GDP, which is more than mining and agriculture combined!  It is a very popular and profitable way to get into running your own business, but still comes with risk.  There are always bad apples in every industry, so it is important that you do your homework.  In saying that, these substandard franchisors only represent 1 or 2 % of what is available to you, so there are plenty of good opportunities out there.  I recommend that you go forward and find a business in an industry you are passionate about, do your homework, have a professional franchise advisor to help you and enjoy the rewards of your hard work.

Philip Ciniglio
Managing Director
Market Minds